All industrialized countries recognize the principle that the country in which a business activity is conducted has the first right to tax the income from that activity. At the same time, international double taxation of those earnings is recognized as an evil to be avoided if the business activities of a given country's citizens are to remain competitive.

As Professor Peggy Musgrave, a longtime student of these matters, recently observed:

Overlapping taxation … is universally condemned on economic grounds. I believe that every economist who has thought at all seriously about the matter recognizes that overlapping taxation discriminates against multi-jurisdictional firms in favor of purely local firms, hampers the free flow of capital to areas where it could be employed most effectively, and impairs economic efficiency. I "know of no scholarly argument against the proposition that overlapping taxation should be avoided.

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